Shorter projections offer realistic pictures
The Dec. 1 article concerning the switching from one-dollar paper bills to one-dollar coins makes the point that this switch “could save taxpayers some $4.4 billion ($4,400,000,000) over the next 30 years.”
I wondered, why was 30 years chosen? How can anyone guess that far in advance? (After all, I don’t expect to be around in 30 years and the savings then won’t mean a thing to me!) Why not project 10 years instead? Oh, I know, a period of 30 years makes the savings look a lot bigger. But what about the accuracy of the projection? Guessing what’s going to happen in 30 years is a lot tougher than guessing what’s going to happen in 10.
But look at the projections that are being made in the current debate about the fiscal cliff.
Reportedly,the president has proposed to delay automatic spending cuts for one year, extending the Bush tax cuts for those earning up to $250,000, extending the payroll tax cut and extending expiring unemployment benefits, while reducing deficits by $4 trillion over the next 10 years.
Ten-year projections seem to be common in the fiscal cliff discussions. I call these projection factors – that is, 30 and 10 –“funny factors.”
In the global economy, we’re having a difficult enough time projecting even one day ahead. (Think of the stock market.) These factors are just used to make the dollar figures look big and impressive. As the time length of a prediction increases, most assuredly, the accuracy of the prediction will fall and lead to funny and very unreliable results.
I’d feel much better if they just tried to project one year in advance and be accurate than to project 10 years ahead and be wildly off the mark. Aren’t some of these projections just out-and-out dreams?
Thomas W. Weber